Thursday, October 14, 2010

Proof That The Fed Has Gone Crackers

Last week's initial claims were revised from 445,000 up to 449,000, and this week's are starting at 462,000. The four-week moving average is 455,750. We have dropped substantially from the school-system related late summer surge in initial claims.

Of course, with job creation still running quite low claims at these levels do not offer much hope of any real reduction in unemployment rates. Continuing claims are over 1.2 million down from last year's level. But that only accounts for the first six months. Extended and EUC beneficiaries are substantially higher than last year's level, and those numbers are reduced by some who have run out their 99 weeks of benefits (or the lower numbers for states with lower unemployment rates).

The employment base, which is adjusted about quarterly based on reports from state UI databases, dropped again in October. The previous number was 126,763,245, and October's total is 125,845,577. The peak in this cycle was the October 2008 number of 133,902,387. So yes, that is more than 8 million jobs lost. Self-employed and contractors are not included in this number.

You can pull as much history as you want for claims, continuing claims and the job base at this link. I wouldn't recommend fooling around with this data right now if you are in a depressive frame of mind, because the jobs base now is lower than the jobs base reported for October of 2000, which came in at 126,084,568.

The job base continued rising right through the 2001 recession until it peaked in the first quarter of 2002 at 128,673,493. The base then dropped very slowly to a cycle low of 126,084,041 in the second quarter of 2004, rose very slowly through the rest of 2004, and picked up a much better expansion in 2005. We surpassed the previous peak in January 2006 at 128,767,336.

So there is much precedent in our service-related economy for the peak during recession and a long drift downwards after the official end of the recession. But there is no precedent at all (ex depressions and panics) for what we are now facing, which will be a rebound to previous peak job base of five to seven years at best, and right now it appears we may not achieve even that.

A ten year period with a net decline in jobs, and a net decline in jobs from the last cycle low to what may or may not be this cycle low. It's daunting. There's a lot that the unemployment rate doesn't tell us.

Compared to 1991:The peak job base was reached in the third quarter of 1991 at 106,333,000. From there the low came in October 1992 at 104,563,780. In the recovery we made up the lost jobs by April 1994, when the jobs base was reported at 106,627,055.

Perhaps a better measure of economic weakness is the brawl taking place in groceries as profit margins erode and shoppers seek bargains. Safeway is another casualty.

To me it appears that this is proof that the Fed can only do harm by trying to inject money into the economy. Since I unfortunately had to look at the depressive numbers to get this far, I think I will expand on this in a second post. It's time to go exercise or drink a lot of coffee or something like that before the Fed drives ME crackers.

If the jobs base is dropping like this, we will likely see population drops to follow. Our current government social policies are based on that never happening. Yet this was all is the demographics, there wasn't any prediction necessary. Current government taxation policies will only increase the rate of decline.

The sad part is there is absolutely no will amongst any politicians - except perhaps for a fraction of tear partiers (which is too small an amount to make any difference) - to change any policies to reverse the trend. There is plenty of will to change policy to exacerbate the trend.

I think Bilderberg/Old Money Foundation-types saw it and used it as justification for the de facto open borders we have had for so many years. It is too coincidental that all across Europe, US, Canada, and Australia that they all were importing a harlot class from the developing world with their exploding populations.

What they either didn't plan for or didn't care about was that the vast majority of immigrants were displacing the native semi and unskilled labor class and doing so at a net negative cost to the society. So now instead of one underclass to support we have two.

Immigration is an issue every elite could love: Dem's got a constituency, Rep's got cheap labor, Academics got justification for their models. The middle class got the shaft, but it's their own fault for not going to a good college like the elites did for themselves.

Allan - I tried to respond that I HOPED you meant harlots, because otherwise the ick factor was extreme. I had a horrifying picture of wizened professionals lusting after the nubile young bodies of illegal immigrant women (and they clean too!). Anyway, Blogger ate my response.

But hey, at least it injected a note of humor into an increasingly grim debate. No one enjoys discussing how to distribute the ever-shrinking pie.

There is no economic question that importing large amounts of unskilled labor drives down prices for such labor. Unfortunately, due to substantial regulatory barriers, we really don't get the manufacturing and production jobs. It's the worst of both worlds.